IDC: IT spending will grow in 2020, but coronavirus causes uncertainty

Worldwide IT spending will increase by 5% this year, but with a few caveats, according to a report by International Data Center (IDC). For one, the coronavirus is front and center this year as businesses keep a tight grip on short-term investments.

China was expected to post IT spending growth of 12% this year, up from last 4% last year, due in part to the U.S. trade deal.

"The coronavirus looks likely to inhibit this growth to something less," IDC said in its report, but it's too early to "quantify the impact on other regions." Risks are more weighted to the downside in the Asia-Pacific region, which is currently forecast to post a 5% increase in IT spending growth this year. Pre-coronavirus, the United States' IT spending growth was projected to be 7% this year, while Western Europe had a positive 3% forecast.

Spending on software and services investments will remain stable this year while smartphone sales are expected to recover on the back of wider 5G upgrades in the second half of 2020, according to IDC.

RELATED: Cloud IT infrastructure revenues down in Q2 amid a lull in overall spending—report

Minus smartphones, IT spending will drop from 7% growth last year to 4% this year. Software growth will be slightly down from 10% in 2019 to less than 9% this year. IDC said that IT services would drop from 4% last year to 3% this year. PC sales are projected to decline by 6% in 2020, compared to a growth rate of 7% in 2019.

"Much of this year's growth is dependent on a positive smartphone cycle as the year progresses, but this is under threat from disruption caused by the coronavirus crisis," said Stephen Minton, program vice president in IDC's Customer Insights & Analysis group, in a statement. "Our current forecast is for broadly stable tech spending in 2020, but PC sales will be way down on last year, while server/storage investments will not recover to the levels of growth seen in 2018 when hyperscale service providers were deploying new datacenters at an aggressive pace."

Last year hyperscale providers, such as Facebook, cut back on their capex spend, which had a negative impact on vendors such as Arista Networks. In 2020, hyperscale service provider IT spending will bounce back to 9% growth, which would be up from 3% last year but off of 2018's pace.

Cloud infrastructure and digital service providers will continue to increase their IT budgets in order to keep up with strong user demand for cloud and digital services.

"Much of the explosive growth in service provider spending from 2016 to 2018 was driven by aggressive rollout of servers and storage capacity, but more spend is now moving to software and other technologies as these providers seek to drive into higher-margin solution markets including AI and IoT," said Minton. "Nevertheless, after infrastructure spending cooled last year, we expect service provider spending to be broadly stable and positive in the next few years because these firms need to keep driving up capacity in order to deliver services to end-users."

An annual growth rate of 6% is expected to continue through the five-year forecast period as investments in digital transformations drive stability in the overall tech investments. IDC said to expect strong growth in cloud, artificial intelligence, augmented reality, virtual reality, blockchain, IoT, big data and analytics and robotic deployments around the world.

In addition to businesses' digital transformations, IDC's Worldwide Black Books said that IT spending would also drive deployments of smart city and smart home technologies by governments and consumers.